Question 2Easter Ltd operates in Sydney, Australia where it is involved in the growing of grapes and theproduction of wine. In June 2021, it anticipated that its assets may be impaired due to a glut onthe market for grapes and an impending tax from the Australian government seeking to reducebinge drinking of alcohol by teenagers.Land is measured by Easter Ltd at fair value. At 30 June 2021, the entity revalued the land to itsfair value of $120 000. The land had previously been revalued upwards by $20 000. The tax rateis 30%.As a result of its impairment testing, Easter Ltd calculated that the recoverable amount of theentity's assets was $1 456 000.The carrying amounts of the assets of Easter Ltd prior to adjusting for the impairment test andthe revaluation of the land were as follows:Non-current assetsBuildingsAccumulated depreciationLand (at fair value 1/7/2020)Plant and equipmentAccumulated depreciationGoodwill$850 000(194 000)128 0001 454 000(750 000)60 000Accumulated impairment lossesTrademarks – wine labels(44 000)80 000Current assetsCash7 000Receivables9 000Required:i. Prepare the journal entries required on 30 June 2021 in relation to the measurement of theassets of Easter Ltd.ii. Assume that, as the result of the allocation of the impairment loss, the plant and equipmentwas written down to $640 000. If the fair value less costs of disposal of the plant andequipment was determined to be $600 000, outline the adjustments, if any, that would need tobe made to the journal entries you prepared in part (i) of this question, and explain whyadjustments are or are not required.

An impairment loss is a recognized reduction in the carrying amount of an asset that is triggered by…

production of wine. In June 2021, it anticipated that its assets may be impaired due to a glu the market for grapes and an impending tax from the Australian government seeking to re binge drinking of alcohol by teenagers. Land is measured by Easter Ltd at fair value. At 30 June 2021, the entity revalued the land fair value of $120 000. The land had previously been revalued upwards by $20 000. The tax is 30%.

production of wine. In June 2021, it anticipated that its assets may be impaired due to a glu the market for grapes and an impending tax from the Australian government seeking to re binge drinking of alcohol by teenagers. Land is measured by Easter Ltd at fair value. At 30 June 2021, the entity revalued the land fair value of $120 000. The land had previously been revalued upwards by $20 000. The tax is 30%.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter18: Corporations: Organization And Capital Structure

Section: Chapter Questions

Problem 38P

See similar textbooks

Similar questions

With regards to Australian Taxation Laws and Case Laws, MJ Limited purchased machinery for $50,000 for its operations on 1 October 2015 and has been using it for income producing activities. In the current financial year (2019-2020), the machinery broke down and it was replaced with another machinery with the cost of $70,000 which could improve the production, a feature that was not available in previous machinery. Explain in detail using relevant tax laws and cases whether this amount of $70,000 is deductible for MJ limited. Kindly use the four sections of: Facts of the scenario. Relevant laws and cases. Application of laws and cases. Conclusion.
Sam Ltd owns a piece of vacant land in Broadmeadows. A substantial number of factory owners establish their manufacturing plant in this location due to its accessibility and high affordability. The management of Sam Ltd wants to adopt fair value model to measure the land on 30 June 2021. Which of the following information is most useful in assisting management in estimating the fair value of the land? Group of answer choices Sam Ltd intends to lease out the land in the next financial year, and they believe they could receive an annual lease payment of $50,000. A factory owner purchased a piece of vacant land near Broadmeadows for $1m to build a new factory plant on 21 May 2021. The cost to build a new factory on a piece land in Broadmeadows is about $200,000. A landowner sold a piece of vacant land in Southbank to a property developer for $1.05m on 21 May 2021.
On March 1, 2022 Tulip purchased for P400,000 a trademark for a very successful soft drink it markets under the name PowPow! The trademark was determined to have an indefinite life. A competitor recently introduced a product that is in direct competition with the PowPow! product, thus suggesting the need for an impairment test. Data gathered by the entity suggests that the useful life of the trademark is still indefinite, but the cash flows expected to be generated by the trademark have been reduced either to P22,000 per year (with a probability of 60%) or to P33,000 per year (with 40% probability). The appropriate risk-free interest rate is 7%. The appropriate risk-adjusted interest rate is 12%. What is the carrying value of trademark as of December 31, 2022? Group of answer choices P377,143 P400,000 P368,291 P397,291
HOME Ltd. is a Canadian-controlled private corporation operating a small land-development business. In the start of 2020, the company acquired a license to manufacture pre-fab homes and began operations immediately. Financial information for the 2020 taxation year is outlined below: 1. HOME 's profit before income taxes for the year ended November 30, 2020, was $245,000, as follows: Income from land development and pre-fab home manufacturing $248,000 Loss of sale of properties (3,000) $245,000 The loss on sale of property resulted from two transactions. On October 1, 2020, HOME sold all of its shares of Q Ltd., a 100% subsidiary, for $100,000. (The shares were acquired seven years ago for $80,000). Also, during the year, HOME sold some of its vehicles (class 10) for $25,000. The vehicles originally cost $50,000 and had a book value of $48,000 at the time of sale. New vehicles were obtained under a lease arrangement. (NOTE: capital gains are only 50% taxable). 2. The 2019 corporate tax…
The semiconductor business of the California Microtech Corporation qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $19 million. The loss from operations of the segment during 2021 was $3.3 million. Pretax income from continuing operations for the year totaled $6.1 million. The income tax rate is 25%. Assume that the semiconductor segment was not sold during 2021 but was held for sale at year-end. The estimated fair value of the segment’s assets, less costs to sell, on December 31 was $20 million. Prepare the lower portion of the 2021 income statement beginning with income from continuing operations before income taxes. Ignore EPS disclosures. (Amounts to be deducted and negative amounts should be indicated with a minus sign. Enter your answers in whole dollars and not in millions.)
SunnySide (Pty) Ltd (“SunnySide”) is a cap manufacturer based in sunny Mpumalanga. Their financial year end is 31 December. On 1 January 2017 SunnySide bought a property for R2 500 000 (20% for land and 80% for buildings). This was correctly classified as property, plant and equipment in the books of SunnySide as they used the building in their production process. On 01 January 2019, SunnySide decided it would change its intentions, and lease the land and building to one of their competitors. The fair value on this date was the same as the fair value on 31 December 2018.The fair value of the land and buildings at various dates are as follows (20% for land and 80% for buildings):31 December 2017: R2 550 00031 December 2018: R2 800 00031 December 2019: R3 000 000Additional information: SunnySide carries all investment property using the fair value model. SunnySide carries all property, plant and equipment using the cost model. Depreciation is provided on a straight-line basis. The…
OMG is in a country which has a capital gains tax, conducted the following transactions: a. Purchased a building in February 2018 for $26,000,000. In March 2019, the companyspent $2,000,000 to install solar panels for electricity in the building. The building was sold for $28,500,000 in 2021. The annual maintenance cost was $500,000. The cost of advertising the sale of the building and the legal fees amounted to $1,500,000. b. A motor vehicle was purchased for $5 million on January 1, 2018. The vehicle was sold in 2021 for $4.5 million. c. Bought an antique painting for $3.5 million in 2019. The painting was sold in 2021 for $10 million. d. Purchased a government bond for $5,000,000 in 2018 and sold it for $7,500,000 in 2021.The company is entitled to an Annual Exemption of $500,000. Capital losses as of 1 January 2021 were $1,500,000. Calculate the capital gains tax in 2021, assuming a capital gains tax of 15%. Part CJohn Peter is aware that there is no Capital Gains tax in Jamaica.…
Nona Co. purchased land worth P20,000,000 on January 1, 2021. The company uses the revaluation model in accounting for its PPE. On December 31, 2021, an independent appraiser valued the land at P43,000,000. But on December 31, 2022, the land had a fair value of P8,000,000. How much revaluation deficit/impairment loss should be recognized in the income statement on December 31, 2022?
Sapporo K.K. was sued by a competitor in late 2017, and company management concluded that there was a 55 percent probability that the company would lose the lawsuit. The best estimate of the loss on December 31, 2017, was 4,000,000 yen. In 2018, the lawsuit is concluded with Sapporo paying its competitor 5,000,000 yen on May 15, 2018. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: Prepare journal entries for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.
Declarmen Corporation owns a factory in the United Kingdom. A change in business climate indicates that Declarmen should investigate for possible impairment. Below are date related to the factory’s assets ($ in millions): Book value $ 570 Undiscounted sum of future estimated cash flows 630 Present value of future cash flows 525 Fair value less cost to sell (determined by appraisal) 540 The amount of impairment loss that Declarmen should recognize according to International Financial Reporting Standards is:
Assume that a U.S.-based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes for given problem. Hirsch Company acquired equipment at the beginning of 2017 at a cost of $135,000. The equipment has a five-year life with no expected salvage value and is depreciated on a straight-line basis. At December 31, 2017, Hirsch compiled the following information related to this equipment: Expected future cash flows from use of the equipment . . . . . . . . $116,000Present value of expected future cash flows from use of the equipment . . . . . . . . . . . 100,000Fair value (selling price less costs to dispose) . . . . . . . . . . . . . . . . 96,600 a. Determine the appropriate accounting for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.b. Prepare the entry(ies) that Hirsch would…
Mr..Park loaned P24,000,000 to Jay & Won Company. The loan is secured by land situated in North Carolina, U.S.A. with a book value and fair value of P30,000,000 and P18,000,000, respectively. Due to the current financial conditions, Jay & Won Company was forced to liquidate. What amount will the Mr. Park receive if unsecured creditors receive 30% of their claims?